Encouraging Savings at the Check Cashing Window Preliminary Results - - PowerPoint PPT Presentation

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Encouraging Savings at the Check Cashing Window Preliminary Results - - PowerPoint PPT Presentation

Apr 12, 2023 253 likes •478 views

Encouraging Savings at the Check Cashing Window Preliminary Results from an Evaluation of a Savings US Finance Initiative January 17, 2017 Product for Check Cashing Clients in NYC usfi@poverty-action.org Introductions & Agenda

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Encouraging Savings at the Check Cashing Window

US Finance Initiative January 17, 2017 usfi@poverty-action.org

Preliminary Results from an Evaluation of a Savings Product for Check Cashing Clients in NYC

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  • Introduction to IPA & US

Finance Initiative

  • Cash & Stash Overview
  • Research Design
  • Preliminary Results
  • RiteCheck’s Perspective
  • Questions

Introductions & Agenda

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

Michael Rosenbaum Nora Gregory Joseph Coleman Thiara Falcon

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Innovations for Poverty Action

Innovate Evaluate Replicate Communicate Scale

Work with partners to generate new ideas Identify what works and what doesn’t using randomized controlled trials (RCTs) Repeat experiments to take results from promising to proven Communicate policy results to help practitioners and policymakers pick the most effective products and programs Help scale up effective programs

IPA is a research non-profit that was created in 2002 to discover and promote effective solutions to global poverty problems.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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IPA US Finance Initiative (USFI)

  • Develop, rigorously evaluate, and scale cost-effective financial

products

  • Use insights from behavioral economics
  • Led by Professors Jonathan Zinman and Dean Karlan

OUR VISION Secure financial lives for all households.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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USFI Project Map

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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FINANCIAL PRODUCTS INNOVATION FUND (FPIF)

  • Competitive research fund to support partnerships between academics and

financial service providers

  • Supports the development of scalable, market-tested products that help

households make better financial decisions

  • Applications from for-profit and non-profit financial institutions

Supported by

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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  • RiteCheck Cashing, Inc.
  • Savings account with option to set aside money every time a check is cashed
  • Novel product due to legal arrangement between RiteCheck and USAlliance

Federal Credit Union (formally BethEx Federal Credit Union)

  • Demand: 200 accounts opened during pilot study

FPIF ROUND I - CASH & STASH

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Product Details

  • To open account need a minimum deposit of $5 and a valid government ID

as well as SSN or ITIN

  • No monthly minimum balance requirement
  • Accounts are interest bearing (0.35% APY)
  • Deposits and withdrawals from any RiteCheck store, at any time
  • Customers must transact at the teller window by presenting their Cash &

Stash account number or a valid photo ID

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Product Motivation

  • 7.0% of households were unbanked in 2015; 30.3% of those households used

a check casher

  • 29.9% of households do not have a savings account
  • 37% could pay a $500 financial shock without difficulty
  • 60% of households experience a financial shock with a median value of

about $2000

Sources: Associated Press-NORC Center for Public Affairs. 2016. Views of the National Economy are Clouded by Personal Finance and Employment Concerns. Federal Deposit Insurance Corporation, 2016. 2015 FDIC National Survey of Unbanked and Underbanked Households. Pew Charitable Trusts, 2015. The Role of Emergency Savings in Family Financial Security.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Impulse Savings

  • “Impulse savings” is a means to combat limited attention, when customers have the cash

in hand

  • Many reasons why low-income people may not save, but it is a hard environment to save

without products like Cash & Stash

  • Low friction to save when cashing check

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Randomized Controlled Trials

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Cash & Stash Research Design

  • This design tests on how behavioral insights can increase product usage for people who

want to save; Cash & Stash creates an environment where limited attention is reduced.

  • Overall, there were 3 treatment groups with 872 clients. The groups tested three behavioral

means to combat limited attention: (1) reminders, (2) sweepstakes, and (3) reward points.

Cash & Stash account offer Customer accepts offer Basic account Reminder only Reminder + Sweepstakes Reminder + Reward Points

Treatments Control

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Implementation

  • Study ran February 2015 to June

2016.

  • Promotional period, where

marketers made offers, ran February to April 2015. Customers randomized

  • n the spot.
  • Customers who opened accounts

during the initial pilot period (April 2013 - Dec 2014) and post-promotion period (May 2015 - May 2016) were randomized in batches by IPA.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Reminder Messages

T1: Reminder Only

“Would you like to make a deposit into your Cash & Stash account?”

T2: Sweepstakes

“Would you like to make a deposit into your Cash & Stash account? Each dollar in your weekly balance is a sweepstakes entry. The bigger your balance, the more chances you have to win!”

T3: Rewards

“Would you like to make a deposit into your Cash & Stash account? Each week you get triple points for every dollar of your balance. The more you have in your account the more points you earn!”

Control: No Prompt

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Implementation Challenges

  • In the first few months of the evaluation, mystery shoppers found that fewer

than one in ten tellers gave the appropriate reminder.

  • After retraining and the implementation of an incentive program, treatment

reminders were made 50% of the time, but often details about Sweepstakes and Points were omitted.

  • A combination of marketers and tellers opened 872 accounts by June 2016
  • ut of a goal of 1,200. Estimation of take-up rate ranged from 19%, marketer

interactions, to less than 1%, the total RiteCheck customer base.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Preliminary Results

4.4 6.1* 8 Control Any Treatment

# of Transactions per month

Transactions per Month

  • Due to implementation challenges we could not specifically test the effects of individual

interventions.

  • Among these results we note a significant increase in usage of Cash & Stash, but no

significant change in savings balances.

  • We also see an increase in number of non-Cash & Stash transactions among those

assigned to any treatment groups.

* Indicates that the result is significant at a p < .05 level or greater.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

20% 24%* 0% 33% Control Any Treatment

% that made a Cash & Stash Deposit

Overall Deposits Made

$143.02 $78.30 $0.00 $250.00 Control Any Treatment

Average Daily Balance

Average Balance

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Qualitative Interviews

  • Cash & Stash account is popular among tellers. Over 60% of tellers have

accounts.

  • Tellers struggled with the time constraints necessitated by the check casher

service model.

  • Tellers encouraged customers to use Cash & Stash as a way to save money
  • n other transactions and products.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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Takeaways & Further Research

  • Reminders impacted account usage unexpectedly: deposits increased, but

we observed no change in savings balances. Qualitatively, we think customers may have been using Cash & Stash more as a transactional account.

  • Cash & Stash seems a like a promising product to enhance customer loyalty

among RiteCheck customers: those in any treatment group made 1.5 more transactions, on average, per month.

  • Keep research design simple, especially when an intervention is delivered

by frontline staff!

  • Future product tests might look at automating reminders.

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

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RiteCheck’s Perspective

IPA & Ford FPIF Context for Cash & Stash Research Design Preliminary Results RiteCheck’s Perspective Questions

  • Motivation
  • Beyond Transactional
  • Loyalty
  • Conversation with Prof. Jonathan Zinman – tipping
  • Experience working partnering with a credit union
  • Philosophical Compatibility
  • The Wheels Came off
  • Lessons learned
  • Why we’re not banks – Deep cultural commitment to frictionless transactions
  • Program necessarily introduces friction
  • Credit Union NCUA Regulations
  • Customer – Garnishes and Attachments
  • Cashiers – IPA Nudges
  • Plans going forward – Build a better mousetrap with USAlliance
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Questions

ngregory@poverty-action.org mrosenbaum@poverty-action.org

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Thank you

poverty-action.org